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ELLIOTT WAVE ANALYSIS - Latest Market Commentary

Stock Indices

News last week of another Ebola case, this time in New York and concern over the results of the latest European Bank stress tests being released this w/end (Sunday) seem to have little effect in the current psychology of the stock market. The bulls have gained confidence since the ‘flash sell-off’ ended the S&P’s decline from its September high of 2019.26 into that mid-October low of 1820.66. The market is digesting rumours that some form of support mechanism was triggered due to high-volatility by the enigmatic PPT, consisting of the Secretary of the Treasury, the Chairman of the Board of Governors of the Federal Reserve, the Chairman of the SEC ###and the Chairman of the Commodity Futures Trading Commission – perhaps? But the more important aspect relates to how the Elliott Wave pattern is unfolding in this recovery. So far, there are some distinct differences between the U.S. and European indices. The S&P’s advance is ambiguous although it is only now reaching levels at 1960.00+/- that interprets this rally as a three wave, counter-trend zig zag pattern. To confirm the zig zag, prices must begin the coming week with some immediate declines, breaking below residual support levels below 1900.00 whilst unfolding into five wave sequences. If this can be done, then the outlook turns immediately bearish. This would certainly fit the profile unravelling in European indices. The Eurostoxx 50 and Xetra Dax indices have both unfolded into more clearly defined zig zag patterns that began from those panic lows, although basis last Friday’s levels, slightly short of idealised target levels. In our latest report, the Stoxx Europe 600 index feature a similar zig zag upswing from its mid-Oct. low, with completion due this coming week. The outliner is the Nasdaq 100 – this index’s straight-line advance looks nothing like a zig zag, or any other corrective pattern – rather, it is taking the form of a five wave pattern. This provides a subtle warning that U.S. indices are capable of trading into higher highs unless they are affected by a European meltdown. In Asia, the recent declines from Sep./Oct.’14 highs have done enough downside already to confirm a larger, more protracted counter-trend declines are underway. Two of its most prominent indices, S. Koreas Kospi and Singapore’s Straits Times are engaged in clearly defined patterns that ultimately project a downward continuation during the next few months – these declines are not minor, but in the region of another -20% below current levels, and so it is difficult to imagine these in counter-sequences to the direction of the main western developed markets. 27th October 2014

Financial Updates Currencies

Currencies (FX)

The US$ dollar has taken a pause within its overall uptrend that began from the May lows. The US$ dollar index has risen by +9.9% per cent since then with more to do before year-end. This is primarily on the back of a weaker Euro even though the Federal Reserve intends to maintain its record US$4.48 trillion balance sheet that translates into low interest rate yields. Shorter-term, a corrective 4th wave retracement has begun from the 86.74 high but as yet remains incomplete with downside targets for the coming week towards 83.95+/- although ###a more immediate break above 86.01 would instead confirm it is already preparing to resume the uptrend. Looking ahead, upside targets remain towards the 88.80+/- level. This is the horizontal resistance of the last several years and we expect this to finalise the current upswing prior to a sustained decline that synchronises with a dramatic turn-around for global commodities marking the beginning of the next stage of the ‘inflation-pop’ scenario. Commodities can only undergo a sustained advance if the US$ dollar weakens through the same period. Meanwhile, the Euro/US$ has recently traded higher from its October low of 1.2500 into a three wave counter-trend pattern – this can extend beyond the 1.2888 level touched mid-month with targets to 1.2958+/- but the larger trend remains firmly locked into a decline that began from the May high of 1.3993 with ultimate downside targets remaining towards 1.2184+/-. In this latest report, Stlg/US$ continues its decline from the July high of 1.7192 but as a developing double zig zag pattern with ultimate downside targets into year-end at 1.5386+/- whilst US$/Yen is approaching some short-term resistance at 108.50+/- but has begun a larger multi-month declining trend from its recent high of 110.08. 27th October 2014

Financial Updates Bonds

Bonds (Interest Rates)

The ECB’s bank stress test results are due out this weekend with about 130 banks taking part in the latest review. A leaked document posted last Friday suggested about 25 will fail the test with 10 in capital shortfalls. Although this does have longer-term consequences, it is not seen as a significant short-term factor although there will be a tendency for some safe-haven buying of German bunds come Monday morning. The Elliott Wave assessment of short-term activity forecasts ###a temporary pullback of the recent gains from the 0.666% per cent low traded earlier this month but maximised to a modest 10bps prior to anther upswing with targets to 0.957%. The overall downtrend in progress from the early-Jan.’14 high of 2.051% remains on course for an eventual attempt to new historical lows at 0.536% before year-end. In the U.S., the key benchmark US10yr yield has recovered half of its preceding decline that began from the September high of 2.655% into the mid-Oct. low of 1.912%. But this is not enough to yet confirm the medium-term direction of trend. So far, the larger decline from its late-Dec.’13 high of 3.043% has unfolded into this recent low of 1.912% as a three price-swing sequence. This can be part of an ongoing downtrend or the completion of a correction within an uptrend. A break out of the 2.655%-1.912% range is necessary to define the next major target levels. 27th October 2014

Commodities

Precious metals are in a transitory phase since forming important lows earlier this month. Gold traded at the beginning of the month at 1182.90 forming a third consecutive low at this horizontal support level matched at 1180.04 in June ’13 and 1184.23 in end-Dec.’13. The pattern contained in its subsequent upswing to last week’s high of 1255.35 can either be part of a larger descending triangle, in which case, gold will continue higher into year-end towards 1307.65+/- or simply a minor corrective sequence with prices set to resume their larger decline in progress from the July ’14 high of 1345.04. It’s a fragile time because if gold does ###resume its downtrend more immediately, it will certainly break the horizontal lows of 1180.00+/- and trigger a wider ‘bearish’ technical signal. From an Elliott Wave perspective, with so many other commodities engaged in the final stages of larger counter-trend declines that began from their corresponding year-2011 highs, it would be more advantageous for gold and silver to take a more direct (downside) route to eventual targets towards 1096.00+/- and 15.50+/-. These are our long-standing downside targets – once completed, the final stage of the ‘inflation-pop’ can then trigger an asset-buying surge for the next few years with record highs in sight! Crude oil is a perfect example of what lies around the corner. Its entire sideways trading range established from the May ’11 high of 114.83 is taking the form of an Elliott Wave corrective ‘flat’ pattern. This comes on the back of a preceding five wave advance, and so, this confirms that once crude oil has ended the ‘sideways’ pattern, perhaps nudging below the Oct.’11 low of 74.95, it will then be ready to explode higher. 27th October 2014

LATEST ARTICLES

THE ‘INFLATION-POP’ - PRECIOUS METALS SET TO SURGE INTO RECORD HIGHS

Bloomberg hosted a Precious Metals Forum on 23rd May and WaveTrack International was invited to present our latest Elliott Wave price-forecasts. The event was sponsored by the CME Group and Johnson Matthey.

OUTLOOK & FORECASTS FOR 2013

Highlights:

  • The 2013 outlook for global stock indices and commodities remains very bullish and is entering the last stage of the ‘inflation-pop’ phase that originally began from the post-financial crisis lows of 2008/09
  • This is expected to ignite another period of asset buying that increases risk-on multiples by a minimum 45% per cent and in some cases as much as +300% per cent, sending some global stock indices and commodities into record highs
  • Shorter-term, there is a danger of a downward adjustment of -5-8% per cent, but then sharp price advances to resume
  • Commodity related stock indices and equities are expected to outperform as a sector during the next 12-16 months
  • Banking stocks to participate, but most will not exceed their pre-financial crisis highs

As always, this year’s Outlook & Forecasts for the next twelve months are created applying the Elliott Wave Principle for the assessment of pattern and price amplitude, also Cycle Analysis for the timing of the larger trend reversals. Not always do they jive, but they seldom contradict and more often, provide valuable insights into one or two variations of a similar theme within a seemingly unlimited amount of possibilities.

Even though this report outlines the price expectancy of all asset classes for 2012 it will also illustrate how this coming year fits together into the larger picture. The reasoning behind this is to move away from the 'black-box' stereotype and show you why the results relate to their specific outcome. Overall, this report deals with two different time-periods – long-term and inter-mediate term. Long-term refers to the uptrends from the Great Depression of 1932 onwards and inter-mediate term for the coming year and into 2013.

HOW TO INTERPRET EACH ELLIOTT WAVE CHART

What do you see when looking at an Elliott Wave chart? Just lots of numbers & letters overlaying the price data? – or do you see definable patterns that are immediately familiar? And how do you interpret the results of the analysis and put it into an effective trading plan? Read on and test your own knowledge of these subjects and much more...

A COMMODITY SUPER-CYCLE?

Recent reports of a Commodity Super-Cycle grabbed my attention for two reasons – first, this is diametrically different to the outlook I foresee developing during the next decade, and second, this terminology has surfaced at a time when various commodities have already undergone large percentage gains measured from the Feb.'09 lows

THE 'DEFLATIONARY SCENARIO'

The primary theme of this presentation focuses on a 'Deflationary' outlook, forecast as the dominant aspect continuing during the next decade. This is derived from analysing the Elliott Wave pattern structure of the CRB (Cash) Index during its expansionary period of the last 76 years.

THE 'FLASH CRASH'

The Update Alert! messaging service of EW-Forecast Plus responded to the sharp collapse and the following recovery of US stock indices during the volatile trading session on the 6th May.

OUTLOOK FORECASTS FOR 2011

This analysis centres around the S&P 500 that is used as a proxy for other global indices. The great bull market beginning from the 1932 low ends 68 years later in 2000 - other global indices peaked later in 2007 (75yrs) – some still continuing to progress.

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"I just wanted to congratulate you on the EW-Compass reports launch. I'd say all the work you've all put into this project is well worth it… never cease to be amazed by the harmony that you find between the fib relations you highlight and the Elliott count you propose. You are a true descendant of RNE, and I'm quite sure he'd have really loved to see your work… Another aspect that sets you apart is your deep knowledge of the how and why of pattern relationships between higher & lower degrees of the same price action. So much to learn there". - T.S.

ELLIOTT WAVE PATTERN

INTRODUCTION TO THE WAVE PRINCIPLE

The Wave Principle, often referred to as Elliott Wave is a unique methodology that applies Natures Laws, those encompassing the Natural Sciences and Universal Geometric Philosophies to the financial markets. It allows us to view price fluctuations as an organised process that can be non-linearly extrapolated to gain a glimpse into the future direction of trends, counter-trends and amplitudes on any market or contract traded around the world.

Expanding Diagonal Patterns - Do they actually exist? - Elliott's inclusion of the Contracting Diagonal

In R.N.Elliott's original treatise of "The Wave Principle (1938)", he introduces us to diagonal patterns for the first time on page 21. Under the heading, Triangles, Elliott describes the difference between horizontal triangles that represent hesitation within an ongoing, progressive trend and diagonal triangles that form the concluding 5th wave of a larger five wave sequence.

NEWS & EVENTS

Tradersworld Online Expo #12 – Starts 12th November 2012

Peter Goodburn will be presenting his latest Elliott Wave analysis at the 12th Trader Expo held online for 7 weeks starting on 12th November 2012 and ending in the new year on 6th January 2013. Peter’s presentation is entitled “Elliott Wave Price Forecasts & Cycle Projections – Three Phases of the 18 Year Bear Market ~ ‘Shock–Pop–Drop’” for more information visit http://tradersworldonlineexpo.com/

Announcement: 123rd Battery Council & Trade Fair Convention in Miami, 1-4 May 2011

Peter Goodburn will be presenting his latest Elliott Wave analysis at the 123rd Trade Fair Convention of the Battery Council in Miami, 1-4 May 2011. Peter’s presentation is entitled "The Historical Price Trend of Lead and Applying the Elliott Wave Principle to plot its course into the Future".

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ELLIOTT WAVE PRICE-FORECAST UPDATES